Debts Not Discharged In Chapter 7 Bankruptcy

On August 9, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Bankruptcy Help Las Vegas, Bankruptcy Information in Las Vegas, Bankruptcy Services Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, chapter 13, by Randy Creighton

The goal of filing Chapter 7 bankruptcy is the possibility of having some or all of your debts discharged.  When a debt is discharged, it is essentially wiped away and you never have to repay it.  However, there are certain debts and obligations that can never be discharged in a Chapter 7 bankruptcy. 

In general, the following kinds of debt cannot be discharged:

All debts that you didn’t list on your bankruptcy petition will not be discharged;

  1. Criminal fines and debts:  All court fees and court-ordered judgments related to any criminal activity cannot be discharged — neither are any judgments or debts incurred as a result of personal injury or death to others caused by your own negligence or criminal activity;
  2. Student Loans:  Although there is a general policy not to discharge student loan debt, in some very rare circumstances, student loans can be discharged, particularly if a hardship condition exists;
  3. Taxes:  Most tax debt cannot be discharged in bankruptcy.  However, if you meet the following requirements your tax debt may be discharged:
    1. The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.
    2. You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can’t help.
    3. The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.
    4. You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
    5. You pass the “240-day rule.” The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)
  4. Fraudulent debts: Any debt that the court finds was obtained fraudulently or illegally will not be discharged.  For example, if you ran up debt on a credit card shortly before filing bankruptcy (within 60 to 90 days of filing), the court will refuse to discharge that debt.  In addition, if you lied on a loan application to obtain funds — that related debt will not be forgiven in bankruptcy;
  5. Alimony and child support payments (court-ordered) are not dischargeable; Divorce and property settlements are not dischargeable unless the other party agrees to it.

Randy M. Creighton, Esq.

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Chapter 13 Bankruptcy Or Loan Modification?

On August 6, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Bankruptcy Help Las Vegas, Bankruptcy Information in Las Vegas, Bankruptcy Services Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, Uncategorized, chapter 13, by Randy Creighton

As I have previously discussed, rarely does a loan modification include a principal reduction.  The typical loan modification only deals with the first mortgage and will only reduce the monthly payment on not the total amount due and owing.  For most Las Vegans this does not make sense because why keep paying on as asset that is completely upside down.

As such, many people turn to Chapter 13 bankruptcy to modify their loans AND reduce the principal balance. In Chapter 13 bankruptcy you can eliminate your second mortgage completely while bringing any missed payments on your first mortgage current over a three or five year period.  In bankruptcy, removing the second lien on a property is called “lien stripping.”  You can lien strip only if the value of your house is LESS than what you owe on your first mortgage.

So, say the value of your home is $175,000 with have a first mortgage of $200,000 and a second mortgage of $150,000, in a Chapter 13 bankruptcy you completely eliminate the second mortgage and only pay on the first mortgage.  Thus, in Chapter 13 bankruptcy you were able to reduce the principal amount of your home by $150,000!!!

Chapter 13 bankruptcy has many other benefits and is some cases can save your home.  If you would like to speak with a qualified bankruptcy attorney who can help you decide if bankruptcy is right for you, and if so, whether Chapter 7 or Chapter 13 bankruptcy is right for you, please contact us.

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REALITY CHECK: LOAN MODIFICATIONS RARELY INCLUDE A PRINCIPAL REDUCTION.

On August 5, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Bankruptcy Help Las Vegas, Bankruptcy Information in Las Vegas, Bankruptcy Services Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, chapter 13, by Randy Creighton

As a Las Vegan who practices in the areas of bankruptcy and short sales, I understand and appreciate the non-stop barrage of commercials and advertisements from people and companies promising the moon, and more when it comes to loan modifications.  However, with a little bit of research and good old elbow grease you can cut through the junk and find out what is reality.

The majority of loan modifications do not include a principal reduction.  I will repeat in bold. The majority of loan modifications do not include a principal reduction.  If this is your goal, while not impossible, I would prepare for David v. Goliath.

The reality is that the majority of loan modifications come in three different forms: (1) Lender reduces your interest rate to no lower than 2%; (2) Lender increases the term of your loan to thirty (30) or sometimes forty (40) years from the date you sign the agreement; and (3) the Lender MAY forebear on a portion of the principal, or in layman terms the Lender will not charge interest on a portion of your loan but you will owe whatever the forebear amount is at the time you sell the house or at the end of the term of the new loan.  In some cases a Lender may blend these tools to modify your loan.

The goal of any loan modification is to reduce the amount due and owing on the home plus any costs relating to taxes, HOA and insurance to an amount of 31% of your gross income OR to an amount that is affordable to you.

So say for example you have gross income of $6,500/month and your mortgage plus taxes, insurance and HOA is $2,500 month, at an interest rate of 6.25%.  Further, the outstanding principal balance of your loan is $400,000.  In this situation, the Lender must reduce your monthly mortgage payment plus taxes, insurance and HOA to $2,015 ($6,500 X 31%). So, say taxes, insurance and HOA equal $300/month.  Thus, the Lender must be able to change the terms of your loan so that a payment on the principal amount of $400,000 will equal $1,805.  Here, this can be accomplished if the Lender reduces your interest to 3.5% and changes the term length of your loan to be thirty (30) years from today. 

A successful modification is not always the outcome.  Say in the above example the homeowner’s gross income was only $4,200.  As such, the Lender must reduce your monthly mortgage payment plus taxes, insurance and HOA to $1,302($4,200 X 31%).  Again, the taxes, insurance and HOA equal $300/months.  Thus, in this example the Lender must be able to change the terms of your loan so that a payment on the principal amount of $400,000 will equal $1,002.  This is simply not possible without either a principal reduction or forbearance on the principal of the outstanding due and owing and Lenders are very reluctant at allowing either of these options.

All is not lost, Chapter 13 bankruptcy may also be able to reduce or eliminate many of your other debts, INCLUDING eliminating your second lien on your house, freeing up funds to pay your mortgage. This is something that no loan modification can do for you. Chapter 13 can stop a foreclosure and give you up to five years to catch up on the missed payments. Many homeowners are able to catch up their missed payments if they are given the time to do so. Loan modification directly with your mortgage company will normally give a matter of months, not years, to spread out the missed payments.

Your decision should be decided knowing all your options. A good attorney can, and will, freely discuss whether workout is a better option for you.

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Las Vegas Homes Prices Continue To Fall

On August 4, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Bankruptcy Help Las Vegas, Bankruptcy Information in Las Vegas, Bankruptcy Services Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, chapter 13, by Randy Creighton

Bucking the national trend, and not in a good way, Las Vegas homes prices fell in May according to Standard & Poor’s monthly S&P/Case-Shiller Home Price Indices report.  Prices in Las Vegas as tracked by the Standard & Poor’s index fell 0.5 percent from April to May, and in May were off 6.5 percent compared to May 2009.

As for the rest of the country, the report said, home prices in May in the 20 markets tracked by the report rose 1.3 percent from April to May and were up 4.6 percent from May 2009. 

“In May, Las Vegas posted a new index low as measured by the current housing cycle, where it peaked in August 2006,” S&P said in today’s report. “The peak-to-trough figure is -56.4 percent, with that market generally returning any gains it had posted since 2000.”

The Las Vegas housing market has taken quite the beating due to the nations second highest unemployment rate, highest per capita rate of foreclosures, failed short sales and highest per capita rate of bankruptcies.

Even more, the Las Vegas housing market will continue to decline due to the expiration of the first time home buyer credit.  “We need to watch where the housing markets will go after these temporary stimuli go away. June’s existing and new home sales and housing starts data do not show much real improvement in those statistics either. It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy,” today’s S&P report said.

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New Home Affordable Modification Program (“HAMP”) Loan Modification Guidelines Taking Effect June 1, 2010

On May 24, 2010, in Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Best Bankruptcy Lawyer Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Personal Bankruptcy Las Vegas, Small Business Bankruptcy Las Vegas, by Randy Creighton

New Home Affordable Modification Program (“HAMP”) Loan Modification Guidelines Taking Effect June 1, 2010

The federal government provided new HAMP borrower outreach and communication guidelines for foreclosure actions while a borrower is being evaluated under HAMP.  Furthermore, these guidelines provide additional protection for delinquent borrowers who have filed bankruptcy but would otherwise be eligible for HAMP benefits. For a copy of the full disclosure, see Supplemental Directive 10-02.

Here are some of the key highlights from the directive include:

FORECLOSURE

Additional Foreclosure steps are required:

  • The servicer must evaluate the borrower’s eligibility under HAMP and determine that the borrower is ineligible before referring the borrower to foreclosure (or make “reasonable solicitation efforts”).
  • If foreclosure activity has already been initiated, the foreclosure sale cannot occur until after the servicer has determined the borrower is ineligible under HAMP (or make “reasonable solicitation efforts”).
  • The servicer must give the borrower 30 days to respond to HAMP “Non-Approval Notices” in certain circumstances before conducting the foreclosure sale.
  • The servicer must provide the foreclosure attorney certification in writing that the borrower is ineligible for HAMP before conducting the foreclosure sale.

BANKRUPTCY

  • If the borrower in active Chapter 7 or Chapter 13 bankruptcy (or attorney or bankruptcy trustee) requests, the servicer MUST consider the borrower under HAMP and can no longer decline borrower as a “proper exercise of discretion”.
  • If the borrower has been approved on a trial loan modification and files a Chapter 7 or Chapter 13, the servicer MAY NOT deny the borrower for a permanent modification only because of filing bankruptcy.
  • If a delinquent borrower has a discharged Chapter 7 and chose not to reaffirm the first lien mortgage debt is still eligible under HAMP, with the following provision added to the permanent modification agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

If you are a homeowner struggling to make your mortgage payment or feel like you’re your lender or servicer has not worked with you on a loan modification, call a bankruptcy

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Do I Qualify For Chapter 7 Bankruptcy?

On April 21, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Filing Bankruptcy in Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, by Randy Creighton

1.  Your Income Is Below The Median Income For A Family Of Your Size In Nevada

The  first step in figuring out whether you can file for Chapter 7 bankruptcy is to measure your “current monthly income” against the median income for a family of your size in your state (See Nevada median income). Your “current monthly income” is your average income over the last six months before you file. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy.

2.  If your income is more than the median, however, you must pass “the means test” in order to file for Chapter 7 bankruptcy.

Use a Chapter 7 Means Test Online Calculator

If you’re looking for an easy way to determine your eligibility under the Chapter 7 means test, use our online means test calculator. Once you enter your zip code, the calculator uses the applicable income and expense standards for your state, county, and region to determine your eligibility.

You’ll have to supply some income and expense information, but the calculator will save you the trouble of looking up income and expense figures for your area and doing the math. And, if you decide to file for Chapter7 bankruptcy, you can use these figures on your official paperwork (the calculator closely follows the format of the means test form, Official Form 22A, that you must complete when you file for bankruptcy).

3.  You Have Not Previously Received A Bankruptcy Discharge Within The Past Eight Years

You cannot file for Chapter 7 bankruptcy if you obtained a discharge of your debts in a Chapter 7 bankruptcy case within the last eight years, or a Chapter 13 case within the last six years.

4.  A Previous Bankruptcy Was Not Dismissed Within the Previous 180 Days

You cannot file for Chapter 7 bankruptcy if a previous Chapter 7 or Chapter 13 case was dismissed within the past 180 days because:

  • you violated a court order
  • the court ruled that your filing was fraudulent or constituted an abuse of the bankruptcy system, or
  • you requested the dismissal after a creditor asked for relief from the automatic stay.

5. You Have Not Defrauded Your Creditors

A bankruptcy court may dismiss your case if it thinks you have tried to cheat your creditors or concealed assets so you can keep them for yourself.

Certain activities are red flags to the courts and trustees. If you have engaged in any of them during the past year, your bankruptcy case may be dismissed. These no-nos include:

  • unloading assets to your friends or relatives to hide them from creditors or from the bankruptcy court
  • running up debts for luxury items when you were clearly broke and had no way to pay them off
  • concealing property or money from your spouse during a divorce proceeding, or
  • lying about your income or debts on a credit application.

In addition, you must sign your bankruptcy papers under “penalty of perjury” swearing that everything in them is true. If you deliberately fail to disclose property, omit material information about your financial affairs, or use a false Social Security number (to hide your identity as a prior filer), and the court discovers your action, your case will be dismissed and you may be prosecuted for fraud.

If you have any questions as to whether you can qualify for chapter 7 bankruptcy contact us.

Randy M. Creighton, Esq.

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Can I Repay A Discharged Debt?

On April 21, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Chapter 7 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, by Randy Creighton

The main reason people file bankruptcy is to receive a discharge of debt.  A debtor receives this discharge at the conclusion of the bankruptcy case in the form of an order from the court.  This discharge is a court injunction prohibiting creditors from taking collection action to collect on discharged debts. Violation of this injunction may result in a contempt of court charge and serious penalties.

But what if you have a debt that you want to pay even after it is discharged? Say for example a debt owed to a family member.

The Bankruptcy Code provides, “Nothing contained in. . . this section prevents a debtor from voluntarily repaying any debt.” 11 U.S.C. § 524(f).  Therefore, you are free to make voluntary payments on all or part of your discharged debts. These payments do not invalidate the discharge order and do not create a new legal obligation. The creditor is still prohibited from contacting you in any way and cannot take any collection action against you, including sending you a bill or even encouraging your continued payments. In this case the term “voluntary” means free from creditor influence or inducement.

If you are interested in making voluntary repayments after your discharge, discuss the matter with your bankruptcy attorney. While there are generally few down-sides to voluntary repayment, your bankruptcy attorney can discuss the pros and cons with you and help you reach the right decision for you and your family.

Randy M. Creighton, Esq.

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Chapter 13 – A Law With Benefits

On April 15, 2010, in Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Bankruptcy Services Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Chapter 7 Bankruptcy Law Las Vegas, Individual Bankruptcy Las Vegas, Personal Bankruptcy Las Vegas, by Randy Creighton
question markMany debtors choose not to file for Chapter 13 bankruptcy because it requires repayment of at least a portion of their debts. Chapter 7 bankruptcy, another option, wipes out many debts entirely.  In some cases, however, Chapter 13 bankruptcy IS the better bankruptcy option. Furthermore, certain debtors don’t get to choose because not everyone is eligible for Chapter 7 bankruptcy leaving Chapter 13 as the only option available.   Here are some good reasons to file for Chapter 13:

When You Cannot File for Chapter 7

You will not be allowed to file for Chapter 7 if you cannot meet some new requirements imposed by the 2005 revisions to the bankruptcy laws. Under these new rules, you cannot file for Chapter 7 if both of the following are true: 

  • Your current monthly income over the six months prior to your filing date is more than the median income for a household of your size in your state (go to the website of the United States Trustee, www.usdoj.gov/ust, and click “Means Testing Information” to see the median figures for your state).
  • Your disposable income, after subtracting certain expenses and monthly payments for debts you would have to repay in Chapter 13, exceeds certain limits set by law. These calculations are commonly referred to as the “means test” — if you have the means to repay a certain amount of your debt through a Chapter 13 repayment plan, you flunk the test and are ineligible for Chapter 7 bankruptcy.

The means test can get fairly complex and, to make matter worse, Congress has its own definitions of “disposable income,” “current monthly income,” “expenses,” and other important terms which, in some cases, can make your income seem higher than it actually is. 

In addition, if you have received a Chapter 7 bankruptcy discharge within the last eight years or a Chapter 13 discharge within the last six years, you may not file for Chapter 7 bankruptcy. 

When You Are Behind On Your Mortgage or Car Loan 

If you want to make up the missed payments over time and reinstate the original agreement, you can in Chapter 13 bankruptcy. You cannot do this in Chapter 7 bankruptcy. 

When You Have a Debt That Cannot be Discharged in Chapter 7 

Tax obligations, student loans, or other debts that cannot be discharged in Chapter 7 can be included in your Chapter 13 plan and paid off over time. 

When You Have a Sincere Desire to Repay Your Debts

You can benefit from the protection of the bankruptcy court if creditors are coming after you. The Chapter 13 process also provides the formal structure and deadlines that can you might find helpful in order to follow through on your good intentions. 

When You Have Nonexempt Property You Want to Keep 

When you file for Chapter 7 bankruptcy, you may keep only exempt property defined as property protected from creditors under state or federal law. You must give your nonexempt property to the bankruptcy trustee who can sell it and distribute the proceeds to your creditors. 

In Chapter 13, however, you don’t have to give up any property. Instead, you repay your debts out of your income. Therefore, if you have nonexempt property that you do not want to part with, Chapter 13 might be the better choice. 

When You Have a Co-Debtor on a Personal Debt 

If you file for Chapter 7 bankruptcy, your co-debtor will still be on the hook which means  your creditor will undoubtedly go after the co-debtor for payment. If you file for Chapter 13 bankruptcy, the creditor will leave your co-debtor alone, as long as you keep up with your bankruptcy plan payments.

Randy M. Creighton, Esq.

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Get Rid of Your Medical Bills Once and For All

On April 14, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Chapter 13 Bankruptcy Law Las Vegas, Chapter 7 Bankruptcy Law Las Vegas, Personal Bankruptcy Las Vegas, by Randy Creighton

According to a recent study published by The American Journal of Medicine medical bills at the core of 50 percent of bankruptcy filings. Even more alarming is that 68 percent of consumers who filed bankruptcy had health insurance.  This is because even a short stay in the hospital can generate bills in excess of $10,000 or even $100,000. With or without insurance a person is usually stuck with a large bill.  Even if you don’t have much in the way of unreimbursed medical expenses, if there is a loss of time from work, the family budget is destroyed with the loss of income.

Every so oftern I get a client asking to file a “medical” bankruptcy and keep the rest of their debts.  However, there is no such thing because the United States Bankruptcy Code requires that all debts be listed.  Nonethless, medical bills are still subject to a debt discharge or debt restructuring under both Chapter 7 and Chapter 13 bankruptcy laws, and thus, you can once and for all eliminate medical debts in bankruptcy.

You should talk to your attorney about what kinds of bills you have, list all your bills on the paperwork that will be provided to the bankruptcy court, and discuss the options that you may have with the attorney.

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Credit and Its Problems – a free seminar

On April 12, 2010, in Bankruptcy Attorney in Las Vegas, Bankruptcy Chapter 13 Las Vegas, Bankruptcy Chapter 7 Las Vegas, Individual Bankruptcy Las Vegas, by Randy Creighton

Credit and Its Problems – a free seminar, tomorrow April 13 @ 7 PM at Sahara West Public Library. RSVP Abe Geller 869-8801.

The presentation is set to cover the different types of credit; the importance of having good credit; options if a person cannot handle his or her current debt load; foreclosure; loan modification; short sales; and bankruptcy.

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